Perspectives from ISB

Razak Dawood ’68, the chairman of Descon, a family-run power, engineering, and chemical conglomerate based in Pakistan, manages more than 14,000 multinational employees across seven countries. Dawood spoke about his own experiences and offered five crucial tips for running a successful family enterprise at Columbia Business School.

Tip 1: Start in the right position: When Dawood joined his family firm at the age of 25 in November 1968, he hit the ground running — or, put more accurately, sprinting at breakneck speed, as he took over as managing director on day one in the midst of significant regional upheaval. But that was a mistake, he cautions. “When my sons came [to the business] in 2001 and 2005, I said, ‘No way. You must work at least 10 to 15 years before you can enter a senior position.”

Tip 2: You need transparent leadership: Dawood’s uncle, Ahmed Dawood, founded the original holding company, Dawood Group, in 1947. By the late 1970s and early 80s, although the corporation was doing well financially, the siblings decided to part ways. “What broke [them] up? The problem wasn’t in the business, the problem was in the family,” Dawood explains. “We had a Family Council, [but] it was never transparent. Minutes were never shown to anybody. There was never any equal representation on the Family Council. You have to have a system of justice, fairness, and transparency and be able to protect the weakest member of the family. Once things start to weaken, they never stop.”

Tip 3: Develop a family “constitution”: It’s critical to implement a code of ethics and behavior that everyone is held accountable to, says Dawood, who notes that he developed his family’s constitution by looking not at other corporations, but at governmental bodies. Dawood identified two parts for a useful constitution: family values and processes of family governance. The constitution also outlines processes by which to evaluate staff and onboard new employees, as well as other important systems of governance, Dawood says.

Tip 4: Transition plans must be put in place: It’s critical for the family business to discuss succession planning and implement transition plans in advance so that when the time comes, everything has already been mapped out. It removes some of the emotion and personal issues from the situation and makes the transition easier and more orderly for everyone.

Tip 5: Even in times of hardship, always be ready for the next growth spurt: The Descon group of companies went through several periods of boom and bust as the political and economic landscape in the Middle East and South Asia shifted. One thing it taught Dawood is that it’s important to see the opportunities in a downturn — and to be prepared for the next upswing. That means always keeping a long-term view in mind and keeping your organization staffed with the best and brightest, knowing that business will rebound and being prepared to meet the demand when it does.

Source: Bordonaro, Agatha., Columbia Business, January 6, 2017; https://www8.gsb.columbia.edu/articles/columbia-business/five-tips-leading-successful-family-business